How Money Walks: Out of California, Into Texas

In the United States today, interstate migration is becoming a more and more prominent topic. A new book called How Money Walks has used IRS data to put hard numbers to which states are losing and which states are gaining wealth due to interstate migration.

Most of it won't surprise you: the northeast and the rust belt states, along with California, are losing residents at incredibly high rates. Most of the south and southwest is gaining. Texas, Florida, Arizona, and Colorado lead the way in total wealth gained due to migration. Some are surprising, though: Washington State, for example, has been a fairly large gainer. And the outlier in the South is Louisiana.

Californians have responded by leaving the state. From 2000 to 2009, the Census Bureau estimates, there has been a domestic outflow of 1,509,000 people from California -- almost as many as the number of immigrants coming in. Population growth has not been above the national average and, for the first time in history, it appears that California will gain no House seats or electoral votes from the reapportionment following the 2010 Census.

Texas is a different story. Texas has low taxes -- and no state income taxes -- and a much smaller government. Its legislature meets for only 90 days every two years, compared to California's year-round legislature. Its fiscal condition is sound. Public employee unions are weak or nonexistent.

More on the Texas/California distinction has been in the news recently, though, as Texas Gov. Rick Perry last month promoted the policies that have turned Texas into an economic machine while California continues to struggle. "I hear building a business in California is next to impossible," Perry said. "See why our low taxes, sensible regulations and fair legal system are just the thing to get your business moving to Texas."

no one claims that at the very moment someone whispers “tax increase” one thousand millionaires head to the border. What really happens is that these higher tax burdens cause wealth and income to flee to states and countries with lower burdens and higher economic growth over time. High-tax states such as Vermont, Michigan and Missouri have not been magnets for jobs over the long run. Look over at Europe, which is once again scaring investors. It is a continent with excellent climate, culture and an educated workforce, but its high taxes and spending have stalled population and economic growth for a decade or more. America will go that way if we continue down the same path, driving out investment, businesses, and jobs.

I spoke with Texas State Comptroller Susan Combs at CPAC last weekend to discuss the Texas process of state budgeting and how she helps keeps the Texas books balanced: